Answer to Question #201299 in Economics of Enterprise for Lao

Question

Donald Trump engaged in a fierce tariff war with China. Using a diagram Justify Trumps action.

Answer 1

Donald Trump engaged tariff war with china which lead to a negative effect on both economies. Due to the increase of tariff demand of consumers not fulfill as well as they have to pay the high price which leads fall in aggregate demand which affect supply and production. Both aggregate supply and production falls and has a greater effect on GDP level as GDP level falls as unemployment and inflation rise in the economy.

Trump took this action with the motive of promoting exporting and discourages import and development of industrial industry but it has a negative effect on both economies. Both GDP level falls as unemployment and inflation rise in the economy.